Court clarifies Sale Certificate vests title in auction purchaser without need for registration, orders secured creditor and authorities to ensure possession handover within 60 days, overriding suit injunction
In a landmark judgment delivered on August 25, 2026, the Gauhati High Court decisively clarified the legal position regarding auction sales under the SARFAESI Act, 2002, emphasizing that the issuance of a Sale Certificate conclusively vests title of the property in the auction purchaser, negating any requirement for further registration. The Court, presided over by Justice Devashis Baruah, adjudicated a writ petition filed by Pradip Mazumdar and others against the Industrial Cooperative Bank Ltd. and another, concerning the failure of the bank to hand over possession of a property sold at auction despite issuance of the Sale Certificate dated February 20, 2015.
The petitioners had purchased a property mortgaged by Sri Naba Kumar Das, who defaulted on his loan, leading the bank to initiate recovery proceedings under the SARFAESI Act. After the auction, the petitioners deposited Rs. 55 lakhs and received the Sale Certificate, but were denied possession. They sought refund of the sale consideration or possession delivery, citing a prior contradictory decision by a Coordinate Bench that had ordered refund without cancellation of the Sale Certificate.
Rejecting the earlier Coordinate Bench ruling as per incuriam (decided in ignorance of binding law), the Court reiterated settled Supreme Court principles that a Sale Certificate issued by the Authorized Officer transfers ownership immediately upon sale confirmation under Rule 9(6) of the Security Interest (Enforcement) Rules, 2002, and Sections 17(2)(xii) and 89(4) of the Registration Act, 1908. The Court cited precedents including M/s Esjaypee Impex Pvt. Ltd. v. Canara Bank and State of Punjab v. M.S. Ferrous Alloys Forgings P. Ltd., underscoring that such Sale Certificates are exempt from compulsory registration and serve as conclusive evidence of title.
However, the Court also acknowledged that possession had not been delivered to the petitioners, a requirement under Rule 9(9) of the 2002 Rules mandating the secured creditor to hand over possession free from encumbrances upon receipt of sale amount. The Court highlighted the Supreme Court's ruling in ITC Limited v. Blue Coast Hotels Limited, which affirms that until physical possession is handed over, the secured creditor retains the authority under Section 14 of the SARFAESI Act to take possession through legal processes.
Addressing the bank's claim that possession was withheld due to an injunction in a pending Title Suit (No. 553/2013) between the original borrower and a third party, the Court clarified that such injunction against the borrower does not impede the secured creditor or district authorities from enforcing possession delivery to the auction purchaser. The Court ordered the bank to forward a copy of the Sale Certificate to the Sub-Registrar for noting the transfer in Book No. 1, and directed prompt action within 30 days to request the District Commissioner, Kamrup (Metro), to take possession and deliver it to the petitioners within 60 days.
The Court refused to order refund of the sale consideration absent cancellation of the Sale Certificate, emphasizing that refund without cancellation would result in unjust enrichment, with the purchaser retaining title without payment. The Court also declined to exercise plenary powers to cancel the certificate on allegations of fraud, stating such factual disputes require trial in appropriate forums.
This judgment reinforces the sanctity of Sale Certificates issued under the SARFAESI Act as conclusive proof of title transfer and clarifies the procedural obligations of secured creditors to deliver possession. It also establishes that pending civil suits or injunctions against former owners cannot obstruct lawful possession enforcement under the SARFAESI framework.
Bottom Line:
Auction Sale - Title and possession of property - Title of property vests with auction purchaser upon issuance of Sale Certificate - Possession to be handed over by secured creditor through necessary legal processes if not delivered at the time of Sale Certificate issuance.
Statutory provision(s):
Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (Sections 14, 17), Security Interest (Enforcement) Rules, 2002 (Rules 9(6), 9(9)), Registration Act, 1908 (Sections 17(2)(xii), 89(4))
Pradip Mazumdar v. Industrial Cooperative Bank Ltd., (Gauhati) : Law Finder Doc Id # 2975072
